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TMI Blog2000 (12) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... ier years, the Assessing Officer held that unabsorbed depreciation was to be given precedence and so he set off the unabsorbed depreciation and carried forward the unabsorbed investment allowance for adjusting in the future years. The adjustment made by the Assessing Officer giving priority to unabsorbed depredation over the brought forward investment allowance was approved by the CIT (Appeals). Aggrieved by the order of the CIT(A), the assessee has filed this appeal before the Tribunal. 3. We have heard the assessee's counsel Sri S.A. Balasubramanian, Advocate and Departmental Representative, Sri V. Suryanarayanan. 4. The dispute in this appeal is regarding the priority for carry forward and adjustment between unabsorbed investment allowance and unabsorbed depreciations. The assessee wanted the unabsorbed investment allowance of Rs. 2,56,41,378 to be adjusted against the income for the assessment year 1991-92 before setting off the unabsorbed depredation brought forward from the earlier years. As a matter of fact, after set off of the unabsorbed investment allowance of Rs. 2,56,41,378, according to the assessee's computation, the total income was reduced to Nil and so no set o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought forward investment allowance. That decision was concerned with the set off of unabsorbed development rebate. Sri Balasubramanian submitted that unabsorbed depreciation relating to earlier years was part of the depreciation allowance and the same could not be thrust on the assessee if the assessee did not want it, for any assessment year. Relying on the decision of the Supreme Court in the case of CIT V. Mother India Refrigeration Industries (P.) Ltd. [1985] 155 ITR 711, he submitted that current depreciation was in no way different from unabsorbed depreciations. According to him, unabsorbed depreciation could never be imposed on the assessee if such adjustment would halve the effect of losing the benefit of any other allowance which the assessee would be lawfully entitled to. It was the contention of the ld. counsel that the assessee had the option to claim the benefit of set off of brought forward investment allowance in preference to unabsorbed depreciations if such adjustment would be more beneficial and that, the Assessing Officer would not be justified in denying the benefit of setting off the unabsorbed investment allowance by adjusting first the unabsorbed depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (1) of section 34 providing that the allowance of depreciation would be allowed only if the prescribed particulars had been furnished, was deleted by the Taxation Laws (Amendment and Misc. Provisions) Act, 1986 w.e.f. 1-4-1988. In the present case, the dispute is not regarding the allowance of depredation and whether the allowance could be given if the assessee did not furnish the required particulars. Sri Suryanarayanan further submitted that there was no difference in the wording of section 32A compared to the provisions of section 33 relating to the allowance of development rebate and so the decisions given by various judicial authorities in regard to carry forward and set off of development rebate would apply equally to set off of investment allowance. 6. We have given due consideration to the submissions on both sides and gone through the facts of the case. We have also perused the paper books filed before us by both sides. While computing the total income for the assessment year 1991-92, the Assessing Officer adjusted the unabsorbed depreciation relating to the earlier years against the income of the current year, to reduce the same to 'nil'. The result was that the u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the investment allowance to be allowed for the following assessment year shall be such amount as is sufficient to reduce the total income of the assessee assessable for that assessment year, computed in the manner aforesaid, to nil, and the balance of the investment allowance, if any, still outstanding shall be carried forward to the following assessment year and so on, so, however, that no portion of the investment allowance shall be carried forward for more than eight assessment years immediately succeeding the assessment year relevant to the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, as the case may be, the immediately succeeding previous year." 8. It can be seen from the above provision that the total income is to be computed first without making any deduction under sub-section (1) of section 32A or any deduction under Chapter VI. If there was a paucity of income then the investment allowance admissible would be such as to reduce the total income to nil. If there was balance of investment allowance remaining unadjusted, then it would have to be carried forward and adjusted in the subsequent year in the same manner. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance, as the eight year period might meanwhile expire. The ld. counsel has drawn our attention to the following observation of the Supreme Court in the case of Mahendra Mills in the head notes- "The provision for claim of depreciation is certainty for the benefit of the assessee. If he does not wish to avail of that benefit for some reason, the benefit cannot be forced upon him. It is for the, assessee to see if the claim of depreciation is to his advantage. Income under the head 'Profits and gains of business or profession' is chargeable to income-tax under section 28 and income under section 29 is to be computed in accordance with the provisions contained in sections 30 to 43A. The argument that since section 32 provides for depreciation it has to be allowed in commuting the income of the assessee, cannot in all circumstances be accepted in view of the ban contained in section 34. If section 34 is not satisfied and the particulars are not furnished by the assessee, his claim for depredation under section 32 cannot be allowed. Section 29 is thus to be read with reference to other provisions of the Act. It is not in itself a complete code." 11. We do not think that the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et income from business for that year by debiting the current year's depreciation. The question is whether any deviation from this normal rule of accountancy is contemplated by proviso (b) to section 10(2)(vi) r.w. proviso (b) to section 24(2) of the 1922 Act or by section 32 (2) r.w. section 72(2) of the 1961 Act, and it is here that the aspect of proper construction of these provisions arises. Dealing with the provisions of the 1922 Act first, it will be clear that proviso (b) to section 10(2)(vi) is in two parts and provides for two things; the first part provides for carry forward of unabsorbed depreciation and its second part provides for clubbing the said carried forward depreciation with the current year's depreciation and deeming the aggregate to be the current year's depreciation. However, carrying forward of the unabsorbed depreciation and the deeming provision in proviso (b) are not absolute but are subject to the proviso (b) to section 24(2). Had proviso (b) to section 24(2) not been enacted by the Legislature the result would have been that the aggregate depreciation would have been deducted first out of the profits and gains in preference to unabsorbed business losses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d effect of the provisions of sections 32, 32A, 33, 33A and 72 is given and the order in which the allowances and the business losses are to be deducted. In that circular the order of priority is shown as under: (i) Current depreciation [Section 32(1)] (ii) Carried forward losses of earlier years [Section 72(1)) (iii) Unabsorbed depreciation of earlier years [Section 32(2)] (iv) Unabsorbed development rebate of earlier years [Section 33(2)(ii)] (v) Current development rebate [Section 33(2)(i)] (vi) Unabsorbed development allowance of earlier years [Section 33A(2)(ii)] (vii) Current development allowance [Section 33A(2)(i)] (viii) Unabsorbed investment allowance of earlier years [Section 32A(3)(ii)] (ix) Current investment allowance [Section 32A(3)(i)] Of course, the circular of the Board is not binding on the Tribunal. We find force in the contention of the ld. DR that the wording of section 33 relating to development rebate is similar to the wording of section 32A and so the decision of the Madras High Court in the case of Coromandel Steels Ltd. is equally applicable to the set off of unabsorbed investment allowance, in view of the similarity in the wording in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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